UPS JETAIR EXPRESS P. LTD, MUMBAI v. ITO 9(3)(3), MUMBAI

ITA 1699/MUM/2010 | 2005-2006
Pronouncement Date: 07-01-2011 | Result: Allowed

Appeal Details

RSA Number 169919914 RSA 2010
Assessee PAN AAACU4322N
Bench Mumbai
Appeal Number ITA 1699/MUM/2010
Duration Of Justice 10 month(s) 3 day(s)
Appellant UPS JETAIR EXPRESS P. LTD, MUMBAI
Respondent ITO 9(3)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 07-01-2011
Assessment Year 2005-2006
Appeal Filed On 04-03-2010
Judgment Text
1 ITA 1699/MUM/10 M/S UPS JETAIR EXPRESS P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI P.M. JA GTAP A.M. ITA NO. 1699/MUM/2010 ASSESSMENT YEAR 2005-06 UPS JETAIR EXPRESS PVT. LTD. PLOT NO. 6-A SHYAM NAGAR OFF. JOGESHWARI VIKHROLI LINK ROAD MAJAS VILLAGE JOGESHWARI (EAST) MUMBAI 400 096. PAN AAACU4322N VS. ITO 9(3)(3) AAYAKAR BHAWAN CHURCHGATE MUMBAI . 20 APPELLANT RESPONDENT APPELLANT BY SHRI SUNIL M. LALA MS. PRIYANKA SHYAMSUKHA RESPONDENT BY SHRI SUMEET KUMAR ORDER PER P.M. JAGTAP A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-20 MUMBAI DATED 16.12.2009 AND THE SOLITARY ISSUE ARIS ING OUT OF THE SAME RELATES TO THE ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF BAD DE BTS WRITTEN OFF. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPA NY WHICH IS ENGAGED IN THE BUSINESS OF PROVIDING INTERNATIONAL EXPRESS COURIER SERVICES IN INDIA. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.10.0 5 DECLARING TOTAL INCOME OF ` NIL. IN THE P&L ACCOUNT FILED ALONG WITH THE SAID RETURN A SUM OF ` 1 81 14 240/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRITTEN OFF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS CALLED UPON BY THE A. O. TO FURNISH THE DETAILS OF BAD DEBTS WRITTEN OFF AND ALSO TO JUSTIFY ITS CLAIM FOR DEDUC TION FOR THE SAME. IN REPLY IT WAS 2 ITA 1699/MUM/10 M/S UPS JETAIR EXPRESS P. LTD. SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE BAD DE BTS WERE WRITTEN OFF SINCE IN VIEW OF THE MANAGEMENT THE SAME HAD BECOME IRRECOVERABLE. IT WAS SUBMITTED THAT THE AMOUNT OF DEBTS SO WRITTEN OFF HAD ALREADY BEEN OFFERED BY THE ASSESSEE COMPANY AS ITS INCOME IN THE EARLIER YEARS AND THE SAID DEBTS HAVING BEEN AC TUALLY WRITTEN OFF IN ITS BOOKS OF ACCOUNT AS IRRECOVERABLE THE ASSESSEE COMPANY WAS ENTITLED FOR DEDUCTION U/S 36(1)(VII) R.W.S. 36(2) AS AMENDED W.E.F. 1.4.89. THIS STAND O F THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. ACCORDING TO HIM IN ORDER TO CLAIM DE DUCTION U/S 36(1)(VII) R.W.S. 36(2) ON ACCOUNT OF BAD DEBTS WRITTEN OFF THE ONUS WAS ON T HE ASSESSEE TO PROVE THAT THE RELEVANT DEBTS HAVE ACTUALLY BECOME BAD AND SINCE THIS ONUS ACCORDING TO THE A.O. WAS NOT SATISFACTORILY DISCHARGED BY THE ASSESSEE HE DISAL LOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF IN TH E ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 26.12.08. 3. AGAINST THE ORDER PASSED BY THE A.O. U/S 14 3(3) AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING THE DISA LLOWANCE MADE BY THE A.O. ON ACCOUNT OF ITS CLAIM FOR BAD DEBTS WRITTEN OFF. AFTER CONS IDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE HIM ON THIS ISSUE AS WELL AS THE MATERIAL AVAILABLE ON RECORD THE LD. CIT(A) RENDERED HIS DECISION IN PARA 5.2 AND 5.3 OF HIS IMPUGNED ORDER WHICH ARE REPRODUCED BELOW:- THERE IS NO DISPUTE THAT THE IMPUGNED DEBTS WERE TA KEN INTO ACCOUNT WHILE COMPUTING INCOME OF THE APPELLANT OF THE RELEVANT Y EAR. THERE IS ALSO NO DISPUTE THAT THE SAID DEBTS HAVE BEEN WRITTEN OFF IN THE ACCOUNT S OF THE RELEVANT YEARS. THESE ARE THE REQUIREMENTS TO BE FULFILLED U/S 36(1)(VII) REA D WITH 36(2) BEFORE A DEBT CAN TURN BAD DEBTS IN ORDER TO BE AN ADMISSIBLE BUSINESS DED UCTION. BUT THERE IS ANOTHER CONDITION TO BE FULFILLED. THIS IS PRESCRIBED IN T HE EXPLANATION TO SECTION 36(1)(VII) WHICH READS AS UNDER:- FOR THE PURPOSES OF THIS CLAUSE ANY BAD DEBT OR P ART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE IN THE ACCOUNTS OF THE ASSESSEE. THE STATUTE THUS CASTS A DUTY ON THE ASSESSING OFF ICER TO EXAMINE AND ONUS ON THE APPELLANT TO PROVE THAT THE DEBT WRITTEN OFF AS IRRECOVERABLE IS NOT A MERE PROVISION FOR BAD DEBT OR IN OTHER WORDS A DOUBTFUL DEBT. SUCH PROVISION FOR BAD DEBT OR DOUBTFUL DEBT EVEN IF WRITTEN OFF AS IRRECO VERABLE IN THE ACCOUNTS OF THE 3 ITA 1699/MUM/10 M/S UPS JETAIR EXPRESS P. LTD. ASSESSEE IS NOT A BAD DEBT ELIGIBLE FOR DEDUCTION U /S 36(1)(VII). THUS THE ASSESSING OFFICER IS BOUND TO SEE AND THE APPELLANT IS BOUND TO SHOW THE BONAFIDE OF THE CLAIM. THE APPELLANT HAS TO SHOW SOMETHING WHICH COMPELLE D IT TO TREAT A DEBT AS IRRECOVERABLE. THIS NEED NOT BE TO THE SATISFACTIO N OF THE ASSESSING OFFICER BUT THE APPELLANT AS A PRUDENT BUSINESSMAN MUST DEMONSTRATE WHY IT DOES NOT SEE IT TO BE A RECOVERABLE DEBT. NO BUSINESS LEAVES EVEN A PENNY GO WASTE OR UNUTILIZED. THE APPELLANT BEING A COMPANY HAS MORE RESPONSIBILITIES . IT MUST THEREFORE SHOW BY DOCUMENTARY PROOF AS TO WHAT COMPELLED ITS MANAGEME NT TO CONSIDER THE IMPUGNED DEBTS AS BAD DEBTS. EVEN THOUGH THE ASSESSING OFFI CER STATES THAT THE APPELLANT HAD FILED DETAILS OF THE DEBTS STILL HE STATED THAT TH E APPELLANT HAS NOT SHOWN ANYTHING AS TO HOW THE DEBTS TURNED BAD. THE APPELLANT HAS FURN ISHED VOLUMINOUS DETAILS BEFORE ME. IT IS NOT PRACTICABLE FOR ME TO EXAMINE THEM AN D COME TO ANY CONCLUSION. I THEREFORE DIRECT THE APPELLANT TO PRODUCE THEM BEF ORE THE ASSESSING OFFICER AND SHOW TO HIM AS TO HOW ITS MANAGEMENT CONSIDERED EAC H ITEM OF THE IMPUGNED DEBTS AS IRRECOVERABLE. ON SHOWING THE RELEVANT MATERIAL S IN SUPPORT OF SUCH CONCLUSION THE ASSESSING OFFICER SHALL ALLOW EACH OF SUCH DEBT AS BAD DEBT. THE AGE OF THE DEBT SHALL NOT BE OF ANY CONSEQUENCE. THE BALANCE OF TH E IMPUGNED DEBTS SHALL NOT BE ADMISSIBLE DEDUCTION AND THE DISALLOWANCE MADE OF T HE CORRESPONDING SUM SHALL STAND CONFIRMED. THE GROUND IS ALLOWED WITH THESE DIRECTIONS. 4. THE LD. CIT(A) THUS RESTORED THE ISSUE TO T HE FILE OF THE A.O. WITH A DIRECTION TO AFFORD AN OPPORTUNITY TO THE ASSESSEE TO SHOW AS TO HOW IT CONSIDERED EACH ITEM OF BAD DEBTS WRITTEN OFF AS IRRECOVERABLE. AGGRIEVED BY T HE ORDER OF THE LD. CIT(A) THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE S IDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE LD. CIT (A) HAS ACCEPTED THE FACT THAT THE IMPUGNED DEBTS WERE TAKEN INTO ACCOUNT WHILE COMPUT ING THE INCOME OF THE ASSESSEE FOR THE EARLIER YEARS AND THAT THE SAID DEBTS WERE ACTU ALLY WRITTEN OFF BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDER ATION. HE HOWEVER HELD THAT THE ONUS WAS STILL ON THE ASSESSEE TO SHOW SOMETHING WHICH C OMPELLED IT TO TREAT THE SAID DEBTS AS BAD/IRRECOVERABLE. HE THEREFORE RESTORED THIS ISS UE TO THE FILE OF THE A.O. WITH A DIRECTION TO AFFORD AN OPPORTUNITY TO THE ASSESSEE TO SHOW AS TO HOW IT CONSIDERED EACH ITEM OF THE SAID DEBTS AS BAD/IRRECOVERABLE. IN OUR OPINION T HIS ASPECT OF THE MATTER NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED 323 ITR 397 (SC) WHEREIN IT HAS BEEN HELD THAT AFTER THE AMENDMENT 4 ITA 1699/MUM/10 M/S UPS JETAIR EXPRESS P. LTD. OF SECTION 36(1)(VII) OF THE INCOME TAX ACT 1961 W. E.F. APRIL 1 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE RELEVANT DEB TS IN FACT HAVE BECOME IRRECOVERABLE. AS FURTHER HELD BY THE HONBLE APEX COURT IT IS ENOUG H IF THE BAD DEBTS ARE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. RES PECTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE APEX COURT IN THE CASE OF TRF LIMITED ( SUPRA) WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT TH E A.O. TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRITTEN OFF . 6. IN THE RESULT APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 7 TH JANUARY 2011. SD/- SD/- (R.V. EASWAR) (P.M. JAGTAP) PRESIDENT A CCOUNTANT MEMBER MUMBAI DATED 7 TH JANUARY 2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 20 - MUMBAI 4. THE CIT- 9 MUMBAI 5. THE DR BENCH F 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI 5 ITA 1699/MUM/10 M/S UPS JETAIR EXPRESS P. LTD. DATE INITIALS 1 DRAFT DICTATED ON 3.1.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 4.1.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER